02 Jul 2020 / Article

African power projects defy the crisis

The Covid-19 pandemic has undeniable consequences for energy projects in Africa. The period behind us is ripe with lessons, such as that resilience has prevailed and that renewable energy will keep carving out an increasingly larger share of Africa’s energy mix.

 

If over the last decade the installed capacity in Africa has increased by an average of 10 GW per year, 2020 is not expected to follow the same trajectory. The Covid-19 pandemic has upended every prediction. However, 2020 will not be a year lost for power projects in Africa. For Romain Py, CEO of African Infrastructure Investment Managers (AIIM), who develops and manages private equity infrastructure funds, disaster never struck: “We are very pleased with the resiliency of our assets whatever their type in terms of technology or their location. We have had some very pleasant surprises. For instance, we invested in assets in Nigeria where we have seen an increase in gas deliveries, which shows that the power sector is doing well there, and we also are very pleased with the performance of our solar power investments in East Africa,” he said.

 

Covid-19 did not impact our business directly. What did impact our business was the lockdown and, more specifically, the severity of the lockdown.” 

Yassine Kerroumi, International Sales Director at Fonroche Lighting

 

Projects are still underway 

 

Simon Ratledge, Partner at Asafo and Co, a pan-African law firm, does not think there is a slowdown in the various projects across the continent: “There have been some green shoots over the last couple of months. Governments are doing their best to keep the pace. Countries like Togo or Kenya showed solid performances. Togo is about to shortlist bidders for its Scaling Solar programme and Kenya is finally making progress. In Cameroon, six gas-fired plants have been shortlisted, while in Zimbabwe we are looking at a very ambitious 500-megawatt project. In Egypt as well, there is a swarm of activity, with expressions of interest requested for waste-to-energy projects.”

 

International Sales Director at Fonroche Lighting, Yassine Kerroumi confirms that his company is still very busy in Senegal: “Two years ago, we were awarded the world’s largest solar street lighting project. It involved installing 50,000 solar street lights to light up 30% of the country. We started carrying out this project 18 months ago. Every week we were lighting up 15 kilometres of road. After a little while, we went up to 30. Then came COVID, so we expected this pace of installation to slow down but that never happened – the exact opposite did. We ticked up to 35, 40, 50 and eventually to 60 kilometres of road per week. This was possible because Senegalese officials recognised and considered that access to energy and light is a basic need. We could benefit from a waiver that allowed us to continue hiring and carrying out our project on the ground as long as we were complying with all health and safety measures. We also started carrying out a second major contract, in Benin, to light up nine cities. This is something we are doing now and we will complete the project by next February.”

 

“This quarter is the best in our history. We invoiced more than €13m in the second quarter of this year, whereas our total revenue last year was around €30m. We are fortunate to be in a position where our order book is full.” 

Yassine Kerroumi, International Sales Director at Fonroche Lighting 

 

Solar has been impacted but renewables will emerge stronger

 

Since the beginning of the pandemic and the successive lockdowns on the continent, solar has fallen on hard times. “In Africa, some lockdowns have been more severe than others. One constant has been reduced energy sales and revenue collection,” said Haruperi Mumbengegwi, Legal Counsel in the Power Sector at the African Legal Support Facility, hosted by the African Development Bank. “Around 80% of solar photovoltaic panels used in Africa come from China. China was one of the first countries to undergo a massive country-wide lockdown and the outcome of this has been a huge delay in the shipping of materials for projects in the construction phase.” 

 

This view is shared by Damilola Ogunbiyi, CEO of Sustainable Energy for All, a United Nations organisation: “In terms of our data, solar home system companies suffered a revenue loss of 27% on average, while mini-grid companies reported a revenue loss of around 40%. But this is one of the best times to change and recover better with sustainable energy. You can see examples of this in my country, Nigeria, where the government has done away with fossil fuel subsidies. This is something that would never have happened in the past.”

 

“In North Africa, there has been a huge initiative to maximise the use of renewables. Morocco, for example, sees 36% of its called capacity as renewable energy on the grid.”

Haruperi Mumbengegwi, Legal Counsel in the Power Sector at the African Legal Support Facility

 

Outlook: adaptation will be crucial 

 

Damilola Ogunbiyi hopes governments will learn from the pandemic: “We currently have about 565 million people without access to power on the continent and the truth is that a majority of these people can also get their power via decentralised renewable energy. I do think utilities and large projects have a key role to play, but I also think we have to look into smaller distributed energy options.”

 

Yassine Kerroumi advocates for his company to adapt: “We expect government budgets to be under increased pressure. But we are also witnessing the emergence of new business models that allow governments to deploy solar street lighting on a very large scale without impacting their budget in the short term.”

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